Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Guangdong Guanghua Sci-Tech Co., Ltd. (SZSE:002741) have tasted that bitter downside in the last year, as the share price dropped 42%. That contrasts poorly with the market decline of 15%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 19% in three years. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last year Guangdong Guanghua Sci-Tech saw its earnings per share drop below zero. While this may prove temporary, we'd consider it a negative, so it doesn't surprise us that the stock price is down. However, there may be an opportunity for investors if the company can recover.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Guangdong Guanghua Sci-Tech's key metrics by checking this interactive graph of Guangdong Guanghua Sci-Tech's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Guangdong Guanghua Sci-Tech shareholders are down 42% for the year. Unfortunately, that's worse than the broader market decline of 15%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.